Less than one month after announcing the sale of its Cove PointLNG facilities to Williams for $150 million, Columbia already isputting more assets on the block. It has decided to sell ColumbiaPropane Corp. and Columbia Petroleum.

Columbia Propane is the fifth largest propane marketer in theUnited States with operations in more than 30 states and nearly350,000 customers. Annualized sales are 270 million gallons. TheColumbia subsidiary has been a clear target for growth over thepast two years. It is operator and half owner (with Conoco) ofAtlantic Energy, Inc., one of three exclusive propane importterminals on the East Coast. Located in Chesapeake, VA, on theElizabeth River, Atlantic Energy has two 10-million gallon storagetanks.

Columbia Petroleum, based in Richland, PA, engages in retail andwholesale petroleum product sales, transportation, and brandedgasoline distribution. In addition to its primary service territoryin Pennsylvania, Columbia Petroleum also serves customers in NewJersey, Maryland, and Virginia. Its annualized petroleum sales are320 million gallons.

Company officials said the planned dispositions resulted fromits ongoing evaluation of assets in view of the company’s “businesspriorities.” It was determined that these assets are not consistentwith Columbia’s long-term strategy, company officials said in astatement.

The announcement marks a reversal of the company’s strategy ofthe past two years during which it purchased several propaneoperations, including Washington Gas’ Frederick, MD, propaneassets, ZerGas’ Virginia propane assets, Lefleur’s propane andpetroleum marketing assets, and the largest purchase, NationalPropane, for $80 million. In late 1998, the company set a goal tohave 30% of its operating revenue generated from nonregulatedactivities by year-end 2001 and propane clearly was to be a largepart of that expansion. However, a reorganization of itsnon-regulated businesses early last year, including the hiring ofBrian Watt as CEO of Columbia Energy Services, led to the eventualsale of wholesale marketing and trading and further changes inbusiness structure and management.

The company’s strategy has turned to strengthening coreoperations of transportation, distribution and storage, saidspokesman Al Rankin. He also said Columbia’s review of assets andoperations is going to continue. Rankin said the asset sales arenot directly related to the company’s proposed $6 billion mergerwith NiSource Inc. The merger is progressing, with completionexpected by the end of the year. Following completion, however,NiSource is expected to sell off a significant amount of assets,potentially as much as $1.5 billion. The combined company will havean enterprise value of about $14 billion.

A briefing package for potential buyers of the propane andpetroleum marketing assets is being prepared. Interested partiesshould contact Philip Aldridge, vice president of corporate financeat Columbia Energy Group, (703) 561-6197. For specific informationregarding Columbia Petroleum, contact Greg Driscoll, managingdirector of Legg Mason at (215) 496-8314.

Rocco Canonica

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